Government Investment in Heat Networks

Transcription

1 Government Investment in Heat Networks

2 Why heat networks in the UK? Lowest cost low carbon heat generally comes at scale need a network to deliver the heat, particularly in urban areas Models show a range of deployment projections from 14-43% by 2050 Committee on Climate Change (CCC) central scenario for the 5th carbon budget shows heat networks serving 18% of buildings heat demand in 2050 (81TWh), saving 15.1MtCO2e/year 5-8% compound growth rate is required even to meet the lower end of these trajectories (from 2% growth rates today). Today: approx 2000 larger heat networks in the UK, supplying 2% of buildings heat

3 Element Energy modelling for CCC

4 Heat networks: story so far Industry led schemes: Heat Trust and technical Code of Practice Heat Metering & Billing Regulations 7m Heat Network Innovation Programme Heat Network Delivery Unit HNIP Pilot

5 Heat networks delivery unit > 140 local authorities and >200 projects supported > 14m funding Diverse range of projects in terms of scale, heat technology, building types A clear demonstration of the ambitions of local authorities across England and Wales to support the deployment of heat networks

6 Heat Networks Investment Project aims 1. Increase the volume of heat networks built, by providing central Government funding which will draw in significant additional investment. 2. Deliver carbon savings for carbon budgets across the lifetime of the infrastructure asset 3. Impact the type of heat networks built so that they are technically and commercially future-proofed and operate with no customer detriment in comparison to the likely alternative heat supply. 4. Alongside investment in innovation and development of the appropriate legislative framework, help to create the conditions for a self-sustaining heat network market that does not require continued Government funding after this programme of investment support has ended.

7 HNIP pilot bids summary

8 HNIP successful projects Recipient Project Name Amount Awarded Technology Project type Sheffield City Council Camden Council Sheffield District Energy Network development Somers Town Energy (Phase 2) 5.73m ( 2.23m grant & 3.5m loan) EFW & Biomass power plant Expansion and interconnection of two heat networks 1.05m grant Gas CHP Expansion of an existing heat network Manchester City Council Colchester Borough Council London Borough of Waltham Forest London Borough of Barking & Dagenham Westminster City Council Crawley Borough Council Manchester Civic Quarter Heat Network Colchester Northern Gateway 2.87m grant Gas CHP New heat network 3.51m grant Heat Pump New heat network Wood Street South 1m grant Gas CHP New heat network Becontree 1.08m grant Gas Boiler New heat network Church Street District Heating Scheme Crawley Town Centre Heat Network 2.56m grant Gas CHP New heat network 1.4m grant Biomass & Gas CHP New heat network Manchester City Council St Johns heat network 5m loan Gas CHP New heat network Total 24.21m

9 HNIP eligible heat networks & costs Connecting two or more buildings No technical or contractual impediment to future expansion / interconnection >50% renewable energy, 50% recovered heat, 75% CHP or 50% combination Reduction in primary energy compared to counterfactual Heat Networks (Metering and Billing) Regulations 2014 CHPQA Commercialisation as part of commercialisation + construction Energy centre and primary network Extra costs for secondary distribution system upgrades; only in existing anchor load buildings Extra costs for tertiary heating and hot water system upgrades where wet systems are being installed for the first time; only in existing domestic anchor load buildings where all properties are wholly publicly owned

10 HNIP funding gap and scoring Funding gap is the HNIP capital contribution required to take the IRR without HNIP funding up to the hurdle rate of the equity investors. (Evidence two financial scenarios with and without HNIP funding and evidence other funding unavailable) Carbon short term carbon savings over i) lifetime of first heat source and ii) across the lifetime of the infrastructure asset Consumers heat bill savings and improvement in consumer protection above Heat Trust or equivalent standard Social benefits national (social NPV) benefits over i) lifetime of first heat source and ii) lifetime of the infrastructure asset Deliverability not scored but high confidence of deliverability to stated timetable is required before projects will be funded

11 Creating conditions for a self sustaining market Sustained pipeline of heat network projects in development matched by a sufficient volume of appropriate finance so that they are built. What are the components of a sustainable heat network market? Heat network sponsor capacity and capability Consumer connections and satisfaction Supply chain growth Costs falling, possibly through contractual standardisation and cost-reducing innovation Sufficient supply of finance, reduced perceptions of risk, and cost of capital falls Conditions becoming more favourable for investment Aggregation of heat networks into larger portfolios commensurate with institutional investor thresholds Contractual innovation which might include unbundling Creation of a secondary market for heat networks

12 Heat networks deployment and delivery

13 Thank you